Tue July 1, 2014

French Bank To Pay $8.83 Billion In Sanctions Probe

This morning, top executives at France's largest bank, BNP Paribas, reassured investors that they have enough cash to pay a $9 billion penalty to the U.S. government. Late yesterday, the bank agreed to plead guilty to violating U.S. sanctions laws and accepted that $9 billion fine. It's the largest penalty ever imposed by the U.S. government for sanctions violations. The bank admitted it helped clients in Sudan and other countries evade U.S. trade embargoes through its New York office. And the U.S. says bank officials continue to violate the law even after they were warned to stop. NPR's Jim Zarroli reports.

JIM ZARROLI, BYLINE: Regulators from the Justice Department, the Federal Reserve, the IRS and the New York Department of Financial Services spent months trying to fashion a settlement in the case. Yesterday, the bank finally pleaded guilty to two criminal charges and agreed to pay a penalty of $8.9 billion dollars. U.S. Attorney Preet Bharara appeared at a press conference in Washington to announce the deal.

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PREET BHARARA: Together, we have helped hold accountable France's largest bank for perpetrating what was truly a tour defraud involving Sudan, Cuban and Iran in a hat trick of sanctions violations.

ZARROLI: The investigation grew out of a tip from a whistleblower to the Manhattan District Attorney's office. From there, investigators discovered what they called a stunning pattern of misconduct. Over an eight-year period, BNP Paribas helped its clients evade sanctions by covering up their names on transactions and replacing them with secret codes. Even after bank officials were warned about what was happening, they did little to stop it, said U.S. Attorney General, Eric Holder.

ERIC HOLDER: They continued for years despite repeated indications and warnings that the bank's conduct violated United States embargoes.

ZARROLI: Regulators said the bank's refusal to cooperate with authorities earlier on was one reason the fine was so high. Other banks charged with similar offenses, such as HSBC and Standard Chartered, faced much smaller fines. The bank will also face temporary restrictions on its ability to carry out certain dollar-based transactions. John Coffee of Columbia Law School says the outcome of the case suggests some more aggressive attitude on the part of bank regulators.

JOHN COFFEE: It has elements of all of the things that recent critics of governmental enforcement have asked for. There is not only a high penalty - 8.9 billion - but an actual plea of guilty.

ZARROLI: On the other hand, the bank will keep its license to operate in the United States and Coffee says just like another bank that was recently charged with helping its clients evade taxes, BNP Paribas should be able to recover.

COFFEE: There was a myth that if a bank ever pled guilty to a felony, it could not survive. We've already seen with Credit Suisse that it's a surviving quite nicely, and it pled guilty two or three months ago.

ZARROLI: To former bank regulator William K. Black, the BNP Paribas case says something remarkable about the modern era. People have lost their capacity for surprise, he says. Some of the biggest and most powerful banks in the world have displayed patterns of serious illegality, and Black says their actions don't really get all that much attention.

WILLIAM K. BLACK: You have institutions that have all the regular markers of legitimacy, but when you look beyond that fancy façade, you see criminality, not as an occasional strategy, but as an actual dominant strategy.

ZARROLI: For their part, French officials have fought hard to lower the penalty paid by the country's largest bank, even suggesting that a disproportionate fine would hurt trade with the United States. By pleading guilty, they said, the bank would be able to preserve its future and continue to operate in a satisfying way for its clients. Jim Zarroli, NPR News. Transcript provided by NPR, Copyright NPR.